October 08, 2018 (MLN): A Senate committee led by PTI members has urged the government to inject around Rs. 400 billion into the power sector to avoid closure of power plants and ease the problem of circular debt, following the sector’s defaults exceeding Rs. 824 billion.
This money could be raised through commercial loans with repayments in five years, and involvement of provincial interior ministers in operations of the distribution companies to increase recoveries and reduce losses and theft.
Headed by Shibli Faraz, the Special Senate Committee on Circular Debt has presented a report containing short-term measures regarding steps that could be taken to deal with the crisis.
These include a review of the fuel supply agreements of the power projects based on Regasified Liquefied Natural Gas (RLNG), to prevent them from getting compensated even if they aren’t producing electricity.
Furthermore, the report suggests that the role of two key regulators, the Oil and Gas Regulatory Authority (OGRA) and National Electric Power Regulatory Authority (NEPRA), should be reviewed and even merged if needed.
It also involves reducing dependence on imported fuels and increasing local resources like hydropower and other renewable sources.
The committee also suggested privatization of power companies, private sector participation in electricity supply operations and handing over of distribution companies to the provincial governments with recovery shortfalls settled from the NFC award.
It recommended that enforcement of the renewable energy policy 2006 to be extended for two years because a sudden break in December 2017 had jammed the investments in the sector.
The committee also called for retreating some of the amendments made to the NEPRA Act by the previous government, as they had compromised the independence and professional standing of the regulating authority.
The report said that the losses in the power sector stood at 18.3 percent and another 8-10 percent of the billed amount remained unrecovered, ensuing a Rs. 295 billion gap. This amount needs to be re-charged to the consumer, or picked up by the government and reimbursed through taxpayers’ money.
The report said the total circular debt was Rs. 1.557 trillion in FY18. This included Rs. 245 billion receivables from the government and related entities, Rs. 500 billion running defaults and disconnections, Rs. 187 billion system losses of five years, Rs. 338 billion tariff delays and Rs. 300 billion as tax refunds and instalments of bills.
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